That equals the rate of growth in personal disposable income in the last economic expansion!

Yet politicians and pundits across the political spectrum often bemoan stagnant wages and income.

Real disposable personal income per capita grew by 2.2% in the 12 months ended July 2018, compared to the 1.8% five-year annualized growth in the peak of the last economic expansion.

You're also likely to hear more talking heads on TV news saying inflation is rearing its ugly head again.

They're not lying but they're often not giving you all the facts.

A key inflation index that U.S. central bankers at the Federal Reserve consider in deciding interest rate policy, the Personal Consumption Expenditure Deflator, poignantly is doing what's expected by policymakers.

The Fed chair, according to the minutes of the Federal Open Market Committee meeting recently released, expects inflation to hover around 2%.

It may go above 2% for a time and that is expected. But it may also go slightly below 2%.

Meanwhile, at 2.3%, the PCED deflator is above the Fed's target of 2%, but the Core PCED, at 2%, is right on target — and that is the key figure.

The core PCED is a basket of fixed monthly expenses that excludes gasoline and other volatile expenses.

It's all about long-term expectations, which is how you want the Fed to think if you're an American investor.

The cost of an employee in the U.S. rose 2.8%, but core PCED grew only 2%. That means employees are getting wage increases because the cost of an employee rose, but the core inflation rate did not reflect the rise! That's a free lunch!

Productivity surged in the second quarter of 2018, which explains why inflation did not rise as fast as wages and benefits, and that's about the best thing you could hope for: increased productivity.

Unit labor costs declined! The cost of an employee went down!

Rising wages and benefits were offset by a 2.9% surge in productivity!

Productivity is a key to prosperity for the American economy.

Labor costs, by far the biggest driver of inflation, declined in the second quarter by almost 1%.

This was a reflection of the surge in second-quarter productivity.

The University of Michigan's monthly survey of confidence dropped from 97.9 in July to 96.2 in August. No irrational exuberance here. Consumers are not about to go on a debt binge, stop saving, or make speculative investments.

Which brings us to the Standard & Poor's 500 stock index.

Despite a looming trade war with China, U.S. political polarization, and a Presidential political crisis, the economy is great, according to shareholders in America's largest publicly-owned companies.

As the current expansion closes in on the post-War record for longevity, investors can expect the coming elections to stir up the false narrative of stagnant wages and slow income growth. Don't believe it.

This article was written by a professional financial journalist for Legacy Capital Partners, Inc. and is not intended as legal or investment advice.